News, Views and People from the Russell Ulyatt Group

Budget 2018 – The end to austerity takes shape
November 2018

Delivered on a Monday afternoon instead of the traditional Wednesday, between key meetings in the Brexit negotiations and amidst turbulent times in Westminster, you could be forgiven for losing track of the 2018 Budget.

Despite the disruption, the Chancellor’s statement brought more focus to the pledged ‘end to austerity’, along with details of an extra £20 billion in funding for the NHS.  Whilst many people were expecting tax rises, Mr Hammond’s job was made easier in the lead up to the Budget by updated forecasts from the Office for Budget Responsibility showing borrowing was £13 billion lower than expected.

One of the most high-profile announcements by Mr Hammond is a new digital services tax – dubbed the ‘Amazon tax’ by the media.  Targeted at large companies, the tax has been set at 2% of revenue derived from UK users through use of things such as search engines, social media platforms and online marketplaces.

Coupled with this tax, and with the UK high street reeling from various high-profile company failures, the Chancellor also announced a cut in business rates for smaller retail businesses.  From April 2019 retail property with a rateable value below £51,000 will see their bills cut by one third.  Local newspapers will receive a further £1,500 discount and even public lavatories will have a new 100% relief.

Not content with appealing to small businesses and the high-street, Mr Hammond also sought to win favour with larger-than-expected increases to the personal allowance and higher rate threshold.  Originally a part of the Conservative manifesto, the increases have been brought forward by a year – from April 2019 the personal allowance will increase to £12,500 and the higher rate threshold will be raised to £50,000.

Of course, while the Budget has been delivered, voices from all corners, including Mr Hammond himself, have warned that another Budget could soon be necessary.  Whether it’s a result of the Brexit negotiations or after a General Election, we may see changes to the country’s finances in the near future.

In the meantime, there could well be many popular aspects of this Budget.  Across the changes to income tax, the politically timely digital services tax, the ninth consecutive year of frozen fuel duties and various spending announcements across roads, high-street environments and tree-planting, it seems clear Mr Hammond wants his end of austerity to be believed.

Please click here to view our budget summary.

  • This communication is for general information only and is not intended to be individual advice. It represents our understanding of law and HM Revenue & Customs practice as at (29/10/2018). You are recommended to seek competent professional advice before taking any action.
  • Tax and Estate planning services are not regulated by the Financial Conduct Authority.
  • The value of an investment and the income from it could go down as well as up. You may not get back what you invest.

 

OBR forecasts present need for tax increases in the Budget
August 2018

The long-term outlook for government finances suggests tax increases are inevitable.

The Office for Budget Responsibility (OBR) produces medium-term financial forecasts alongside the Budget and Spring Statement, but that is not its only task.  It is also required to take a longer-term view of the public finances, producing a Fiscal Sustainability Report every two years.

The latest version of the report was published in mid-July and did not make for comforting reading.  The graph is a good summary of the bad news:

  • The purple lines show the projected government borrowing as a percentage of the size of the UK economy.  In 2017/18 annual borrowing was 1.9% of Gross Domestic Product (GDP). By 2067/68 it becomes 85.6%.
  • The green line shows the total amount of government debt, also as a proportion of the UK economy.  As at May 2018, total borrowing was 85.0% of Gross Domestic Product (GDP). By 2067/68 it becomes 282.8%.

In the report, the OBR says, “Needless to say, in practice policy would need to change long before [2067/68] to prevent this outcome.”  That means reduced expenditure and/or increased taxation.

Reductions in expenditure are unlikely, as much of the rise is driven by the costs of caring for an ageing population.  In the short term, increasing taxes is also hard to imagine given the current political climate.  In the longer term, tax rises appear unavoidable based on the OBR’s calculations.  The first indications of what form tax rises might take could emerge when the Chancellor gives his response to the OBR in the Autumn Budget.

If you are looking for any solace, it is best sought in mathematics: these types of long-term projections are highly sensitive to relatively small changes in the underlying assumptions.  If the UK economy were to grow faster than the 2.2% the OBR has assumed, the situation improves significantly.  Alas, the opposite is also true.

With the UK’s growth rates remaining low, however, it seems likely the government will need to take some kind of action soon.

  • The value of tax reliefs depends on your individual circumstances.
  • Tax laws can change.
  • The Financial Conduct Authority does not regulate tax advice.

 

2018 proves volatile after the smooth sailing of 2017
August 2018

The first six months of 2018 were unpredictable times for investors as global stock markets suffered a sudden bout of volatility.

Source: LSE

The unpredictability came as a major surprise after the general stability of 2017.  Once the dust had settled there was a mixture of good and bad news.

The UK markets were inevitably led by Brexit, with negotiations mainly at the intra- rather than inter-government level.  The other perennial British topic, the weather, produced the Beast from the East, depressing economic activity in the first quarter.

US short term interest rates continued to rise under the new chairperson of the Federal Reserve, with more increases promised for the second half of the year.  Meanwhile, the tension between America and North Korea turned into a denuclearisation agreement and the Trump tax cuts were followed by the start of Trump trade wars, hitting long-term allies as well as the supposed target of China.

For all that, an investor who opened their first newspaper of the year on 1 July 2018 would have thought nothing much had happened.  The FTSE 100 index fell by less than 1% in the first six months of 2018.  Across the Atlantic, the S&P 500 rose in the same period, but only by 1.7%.

The small overall changes are a reminder that daily market movements often turn out to be self-cancelling noise, best ignored by the long-term investor.

  • The value of your investment can go down as well as up and you may not get back the full amount you invested.
  • Past performance is not a reliable indicator of future performance.
  • Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

The Chancellor’s first Spring Statement
March 2018

Mr Hammond made clear some while ago that he wanted his Spring Statement to be a short financial briefing rather than a mini-Budget, complete with rabbit-out-of-hat announcements.

Although his speech ran to 25 minutes, rather than the 15-20 that had been promised, the Chancellor stuck to a no-frills script.

Click here to view our Spring Statement Summary

There were no new tax measures and no spending changes.  The Office for Budget Responsibility (OBR) trimmed its projections for government borrowing, but Mr Hammond simply banked the savings for his Autumn Budget.  Spending will be subject to a detailed review in 2019.

While the Chancellor appeared to say little, his statement was followed by the publication of a range of documents covering areas including:

  • English business rates – The next revaluation of business property in England will be brought forward one year to 2021, with three-yearly revaluations thereafter.
  • Entrepreneur’s relief – A consultation paper was published on how to give entrepreneurs’ relief in circumstances where it would otherwise be lost because of a new share issue.
  • VAT threshold – The government issued a call for evidence on restructuring the VAT registration threshold to offer more incentives for small businesses to grow.  There is some evidence that businesses deliberately limit growth to avoid crossing the existing £85,000 threshold (which has been frozen for the next two years).
  • Tax and the digital economy – There were several papers examining taxation issues surrounding the digital economy, including VAT and income tax leakage through internet trading platforms.
  • Self-funded work-related training – A consultation paper was published examining how to extend the existing tax relief framework to self-funded work-related training by employees and the self-employed.

Many of these documents will eventually result in legislation, but that doesn’t mean no tax changes in the interim.  The impact of last November’s Budget (and some earlier measures) will soon be felt with the start of the new tax year.

Please get in touch with us if you’d like to discuss any aspects of the Spring Statement and how they might affect you.

Tax Tables 2018/19
March 2018

Click here to view our tax tables for the 2018/19 tax year, updated with announcements made in the Spring Statement on 13th March.  We hope you will find them useful and interesting.

Please get in touch if you would like a discussion with us about your tax or general financial situation.

RU freezing?
March 2018

Despite the snowy conditions and temparatures of minus 5, it’s business as usual today at The RU Group.

Our dedicated team battled the elements to make it into the office today and even braved the icy weather for a team photo – and a snowball fight!

A big thank you to everyone.